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3 Takeaways From Vera Bradley's Q2 Earnings Release

By Pearl Wang - Sep 9, 2020 at 12:05PM

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The company recovered from a difficult first quarter, hamstrung by COVID-19 related store closures.

On Sept. 2, Vera Bradley (VRA -2.39%) reported better-than-expected second-quarter earnings results driven by a recovery in store sales and strong online demand. The luggage and accessories company reported earnings per share of $0.32, beating consensus estimates of a $0.07 loss. Revenue of $131.8 million also came in above the consensus projection of $100.5 million.

Here are three major takeaways from the report.

An advertisement for Vera Bradley's "Harry Potter" collection.

Image source: Vera Bradley.

Digital was very strong during the quarter

Vera Bradley's e-commerce revenue doubled year over year. The consumer discretionary company's new customer acquisition on was up triple digits, and management attributed the success in part to its investments in customer data science and digital marketing. The company was also nimble as it adjusted to consumer preferences with its marketing spend, turning its focus away from categories such as travel to currently popular categories like hands-free or washable masks.

The company has made investments to ensure the continued growth of its e-commerce business. Vera Bradley recently switched over its e-commerce sites to a cloud-based Shopify Plus platform. The company also upgraded its business intelligence and order management systems for a more efficient operation.

The specialty retailer's 2019 acquisition of accessories company Pura Vida also boosted its e-commerce position. CEO Rob Wallstrom commented on the earnings call, "Our acquisition of digitally native Pura Vida, which resulted in e-commerce being a larger share of our total company revenues, along with our continued investment in Vera Bradley's e-commerce site and infrastructure has positioned us well for the future."

Vera Bradley stores and Pura Vida performed well

In July, Vera Bradley's 133 stores that were open for the month managed to generate about 70% of the sales seen in the prior-year period. Increased conversion and ticket size helped drive those results. For the Vera Bradley direct segment, second-quarter revenue declined 13.9%%, a substantial recovery from the first quarter's decrease of 48.2%. Factory stores have performed better than full-line stores in 2020, as consumers favor shopping in outdoor venues over indoor malls. Management said it sees revenue momentum continuing.

Pura Vida saw total revenue increase 6% in the second quarter, driven by the brand's e-commerce revenue, which was up 22%. Revenue was held back by "significant supply chain and wholesale disruption" as the primary manufacturing facility in El Salvador was closed for more than seven weeks during the quarter.

Management is addressing the supply chain issues. "We are actively working to further strengthen and diversify our raw material sourcing and production capabilities and expect to have the alternate sources operational for fourth quarter deliveries," Wallstrom said on the call. 

Collaborations will be a growth driver for Vera Bradley

Vera Bradley launched a collaboration with the popular Harry Potter franchise in July. It was a success with many items selling out quickly. The collaboration has a variety of offerings -- from robes to backpacks and lunch bags for back to school. Not only did the new line help boost revenue, it drew new customers to the Vera Bradley brand.

"The day of the launch, we had record visitors to our website, many of whom were new to Vera Bradley," Wallstrom said. " This launch was a huge success and we are reordering some of the most popular items just in time for holiday."

Overall, the American bag and luggage company turned in a strong second-quarter earnings report with robust demand from its e-commerce business and signs of strength at reopened stores.

Pearl Wang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool has a disclosure policy.

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Vera Bradley, Inc. Stock Quote
Vera Bradley, Inc.
$4.70 (-2.39%) $0.12
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Shopify Inc.
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